S&P 500 Almost Tops Record Amid Recovery Bets: Markets Wrap

(Bloomberg) -- U.S. equities continued their rally into a sixth day, putting the benchmark S&P 500 within a whisker of its closing high.

The S&P 500 gained 0.4% as traders weighed company earnings against risks from inflationary pressures. Verizon Communications Inc. and Anthem Inc. were higher after better-than-expected results. Meanwhile, Novavax Inc. plunged on another vaccine delay, and Netflix Inc. was lower after an underwhelming outlook.

The gains come on the heels of the S&P 500’s best start to an earnings season in the last two years with the index gaining about 3.6% in the first week. Solid corporate results have helped counter concerns stemming from elevated inflation, driving stocks higher. Elsewhere, crypto shares also rose as Bitcoin surged past a record.

“What we see is an earnings season that’s likely to be more volatile than the last several,” said Beata Kirr, co-head of investment strategies at Bernstein Private Wealth Management, on Bloomberg TV and Radio. The past couple quarters of have seen earnings expand 45% year over year, whereas consensus estimates for 2022 is a more moderate 9% year-over-year gain, she explained. 

“Now that’s still positive,” she said. “And that’s one of the fundamental underpinnings that’s really driving the equity market forward.”

The yield on the 10-year Treasury note was little changed as corporate earnings have taken some of the spotlight away from concerns about stagflation -- the combination of lower growth and higher inflation. Still, clouds are gathering over the economic recovery in the face of higher energy costs, global supply-chain bottlenecks and reduced central bank support.

The dollar continued to weaken against major peers on Wednesday as traders increased bets central banks around the world will raise interest rates before the Federal Reserve to combat price pressures. Governor Randal Quarles said the Fed is not “behind the curve” with its monetary policy and said he still views current price increases as “transitory.”

Oil gained in New York as inventories fell. Base metals declined after China launched a blitz of measures to tackle the energy crisis. Elsewhere, Congressional Democrats made headway in breaking a stalemate on the president’s multitrillion dollar tax and spending package. 

“The market is very much testing how equipped companies and the rest of the economy are to be able to manage this type of transition where we have a less aggressive Fed, less supportive fiscal policy and more normal levels of economic growth,” Kara Murphy, chief investment officer at Kestra Investment Services, said. “There are definitely concerns out there, but for now risk assets seem to be brushing off those concerns.”

In Europe, food and beverage companies rose after Nestle SA and Deliveroo Plc forecast faster growth, while retailers fell after Kering SA reported slowing sales at Gucci. In Asia, equities were mixed as traders continued to monitor the debt woes at China’s real-estate developers. China Evergrande Group said it has terminated discussions to sell its property-management arm and asked that its shares resume trading in Hong Kong on Thursday.  

For more market analysis, read our MLIV blog.

Events to watch this week:

• Earnings roll in, including from AT&T Inc., Barclays Plc and Tesla Inc.
• U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday
• Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.1%
• The Dow Jones Industrial Average rose 0.4%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.1652
• The British pound rose 0.2% to $1.3826
• The Japanese yen was little changed at 114.28 per dollar

Bonds

• The yield on 10-year Treasuries advanced one basis point to 1.65%
• Germany’s 10-year yield declined two basis points to -0.13%
• Britain’s 10-year yield declined two basis points to 1.15%

Commodities

• West Texas Intermediate crude rose 1.1% to $83.87 a barrel
• Gold futures rose 0.9% to $1,786.20 an ounce

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